Rendell's ambitious energy effort

By Jeff Gelles INQUIRER STAFF WRITER

Posted: June 03, 2007

It was just an office toy: a solar-powered windmill that turned in Dan Desmond's Harrisburg windowsill till it stopped one day this spring. But the reason it quit may help illustrate the future of energy in Pennsylvania - especially if Desmond's boss, Gov. Rendell, persuades the legislature to enact his ambitious Energy Independence Plan before it starts its summer recess.

The windmill quit because of $10.5 million in energy savings being realized at the 16-story Rachel Carson State Office Building, where Desmond works as deputy secretary of environmental protection. One improvement, a window film that cuts heat gain from summer sunlight, turned the toy into a dud.

But Pennsylvania state government paid nothing up-front for the renovations. Their $8.2 million price tag is being covered by an energy-services contractor, Noresco, which will be paid from the state's utility-bill savings over the next 15 years. The deal guarantees that state taxpayers will save the balance, $2.3 million.

To Rendell, that's exactly the kind of win-win formula that can turn a small new charge on Pennsylvania electric bills - 45 cents a month for the average consumer - into $10 billion in energy savings for the state's residents and businesses, and meanwhile provide a big boost for the state's overall economy.

Such big savings from a small investment aren't magic or sleight of hand, say the Rendell administration and the plan's supporters, including environmental advocacy groups such as PennFuture and large energy users such as United States Steel Corp.

Rendell says the small new "system benefits charge" - one-twentieth of a cent per kilowatt-hour, or about $5 a year for an average residential customer - would allow the state to establish an $850 million fund that would make Pennsylvania a leader in the effort to reduce U.S. dependence on imported oil.

Donna Cooper, Rendell's secretary of planning and policy, said the fund would be used to leverage about $3 billion in new investment in renewable-energy sources, such as solar electricity and "biodiesel," fuel produced from agricultural sources such as soybeans or restaurant grease.

"The question is, is Pennsylvania going to be a leader in the front of the market as a developer of replacement fuels, or are we going to stand by and watch," Cooper said Friday.

Rendell's focus on energy goes well beyond his legislative proposals. For the last several days, for example, he and Kathleen A. McGinty, secretary of environmental protection, have been in Spain trying to lure additional investment by companies such as Iberdrola S.A. and Gamesa Corporacion Tecnologica S.A., two European energy companies that have invested in Pennsylvania's fledgling wind-power industry.

The state is also hoping to attract investment from solar-energy companies such as China's Solarfun, a leading manufacturer of photovoltaic cells.

It's not yet clear whether the legislature will embrace Rendell's energy plans, although there are some signs of bipartisan support. On Tuesday, two Senate committees will hold the first of two joint hearings on the proposals.

"We're talking about the right things here: alternative energy, reducing our reliance on fossil fuels," said Mary Jo White (R., Venango), who chairs the Senate Environmental Resources and Energy Committee. But White said she was hesitant about the scope of Rendell's plan. "It's not something you rush into," she said.

Supporters of Rendell's plan say a key benefit would come from its focus on conservation, or on "managing demand," as a method of coping with the volatility of energy markets - especially the electricity market, in which brief periods of peak demand generate an outsize portion of utilities' costs.

"The 100 hottest hours of the year - a little more than 1 percent of all hours - typically account for 20 percent of the costs of serving the residential customer," said John Hanger, head of PennFuture and a former utility commissioner.

"Energy conservation has always been the elephant in the room," Hanger said Friday. "It's the single most important thing if you're going to have a coherent energy policy."

Hanger said Rendell's plan would encourage conservation in three basic ways:

By requiring utilities to stabilize electricity demand at current levels, breaking the historical trend of demand growth of 1 percent to 2 percent a year.

By requiring utilities to provide customers with "smart meters," which show when energy is used and enable utilities to offer savings to customers who volunteer to cut their usage during periods of peak demand.

By offering tax credits to consumers who replace older air conditioners or refrigerators with efficient "Energy Star" models.

Hanger said the plan would push Pennsylvania utilities to invest in what energy guru Amory Lovins calls "negawatts" - energy "created" by reductions in use.

"The good news is that it's much cheaper to conserve electricity than it is to build any new power plant," Hanger said. "There's a whole industry out there that already exists that is working with larger customers to reduce energy use."